Crown paint maker eyes ICI takeover

Dulux paint maker ICI was today confirmed as a takeover target of Dutch chemicals firm Akzo Nobel, the owner of rival paints brand Crown.

Akzo said an approach to the board of the well-known British firm had been rejected, although it stressed it had not ruled out further interest.

It is thought Akzo, which has long been seen as a possible suitor for ICI, tabled an informal approach worth £7.2bn (€10.6bn) for its bid target.

ICI, which employs around 4,000 people in the UK, said it had rejected the proposal because it "significantly" undervalued the company.

It added: "The board is very confident in the group's strategy and strong growth prospects."

ICI also confirmed the offer price of 600p a share, worth £7.2bn (€10.6bn).

Meanwhile, the Dutch firm said ICI would represent a "highly attractive" addition to its coatings and chemicals business, adding that it would continue to evaluate all strategic opportunities, including ICI.

Akzo's statement said: "There can be no certainty that any further proposal will be made to the board of ICI or that any offer or transaction will result."

ICI's share price has reached seven-year highs as investors anticipate a bidding war, with a number of other parties thought to be interested in a takeover.

While Akzo Nobel has been tipped as the most likely suitor, US company Dow Chemicals is also rumoured to be setting its sights on ICI, as is India's Reliance and a host of private equity firms.

The chances of an ICI takeover increased after the group made two disposals last year, including the £1.2bn (€1.8bn) sale of its flavours and fragrance operation Quest.

The disposals, which focused the group on areas of strength such as paints, adhesives and speciality chemicals, helped cut ICI's debt mountain and narrow its pension scheme deficit.

The pensions gap could still present a hurdle to potential suitors, as it is believed that ICI's pension fund trustees are planning to play a central role in any takeover negotiations.

Pension scheme funding is becoming increasingly important in corporate takeovers as trustees look to secure the retirement benefits of members.

The trustees of Alliance Boots' scheme are threatening to try to block a £11.1bn (€16.43bn) private equity-backed takeover of the group if its funding demands are not met.

Akzo Nobel, which was created following a merger of industrial groups Akzo and Nobel in 1994, has targeted the UK market in the past after acquiring Courtaulds in 1998. The company employs more than 60,000 people.